That HR and people management issues are moving steadily into the realm of finance is becoming more apparent every day. When accounting professional organizations start sponsoring surveys looking at human capital management, things are reaching the tipping point.
The reason for this is simple. If companies do not have the right people and the right mix of people, they cannot maximize their profitability and effectiveness. A survey of 313 CEOs, CFOs and HR executives conducted on behalf of Chartered Institute of Management Accountants (CIMA) and the American Institute of Certified Public Accountants (AICPA) found that companies admit that they are missing performance targets and growth opportunities because they don’t have the people in place necessary to exploit opportunities, pursue and nurture innovation, and achieve goals. “This is mainly due to the lack of information to support decision making, strategy development and investment evaluation,” notes the survey report. No wonder these issues are falling right in the wheelhouse of finance and accounting.
So what can companies do about this? Let’s look at the six key problem areas the survey uncovered.
1. Inadequacies in talent management. Survey respondents note that they are not confident about the quality and usefulness of their organizations’ human capital data or the company’s ability to analyze that data. As a result, these companies cannot make effective decisions on human capital management. The fact that finance is getting involved in these issues bodes well for the future. After all, few areas of the company are more adept at collecting and analyzing data. However, finance must be careful not to go it alone. Other areas of operations, especially HR, must have key input into this effort.
2. Disagreement about C-level skills. Although the CEO and CFO tend to be on the same page when it comes to talent management, HR executives tend to take a different, but no less valid, view. Here’s just one example: According to the survey, 77% of CEOs believe that cutting spending on workforce skills, training and qualifications is part of their company’s policy over the next 18 months, while just 49% of CFOs and 18% of HR directors hold the same view. It sounds like CEOs need to sit down with their CFOs and HR executives and clarify these issues.
3. Poor succession planning. Most companies need to pay more attention to succession planning. More than half (51%) of the respondents say that their companies do not have a formal succession planning process for C-level roles such as CEO, CFO and COO. Interestingly, despite this, 36% of HR directors feel confident that their organizations have the necessary talent on tap and will not need to look outside the organization for this talent. However, fewer than 10% of the CEOs and CFOs agree with this view.
4. Ineffective talent management tools. This overall lack of clarity in people management issues could also be causing companies to question the effectiveness of various talent management tools. However, with better data and metrics, companies can be more confident when it comes to determining which tools are most effective in each situation.
5. Who measures talent management effectiveness? CEOs and CFOs think that the CFO has a mandate to measure the effectiveness of a company’s talent management, but HR executives beg to differ. Two-thirds of CEOs point to the CFO, while 83% of HR executives think measuring talent management is within their own purview. In this case, both are correct. CFOs have analytical and strategic capabilities to contribute to this effort and HR has the deep knowledge of talent. Both should work together to improve this area.
6. Questionable human capital data and analytics quality. Only 12% of the CEOs surveyed are confident in the human capital data they receive and even 38% of HR executives note that getting accurate data and metrics on human capital costs, productivity, value and ROI is a struggle. There is no easy answer to this question. In many cases, it is a matter of bringing the organization’s best minds together to identify the data required and to develop the right technology to deliver that data.